Alvotech Confronts Securities Class Action Investigation Amid Deepening FDA and Governance Woes

What happened

Rosen Law Firm is encouraging Alvotech investors to inquire about a securities class action investigation, alleging potential material misrepresentations in business information. This legal scrutiny follows the FDA's complete response letter for AVT05 in November 2025, which revealed persistent manufacturing deficiencies at Alvotech's single Reykjavik facility and forced a sharp guidance cut. The company's governance is under fire, with acknowledged material weaknesses in internal controls and high leverage of ~$1.1 billion debt against negative equity. Despite some European approvals, market sentiment has shifted from biosimilar growth optimism to regulatory execution risk, with the stock down ~65% over the past year. The investigation amplifies disclosure and credibility concerns, threatening to further erode investor confidence amid an already fragile operational and financial backdrop.

Implication

The class action probe introduces potential legal liabilities and costs, straining Alvotech's limited cash resources and complicating its high-debt refinancing needs. It underscores governance weaknesses that may deter partners and lenders, risking commercial agreements and covenant compliance. With negative equity and reliance on a single manufacturing site, any further regulatory setbacks or legal distractions could trigger liquidity crises or dilutive capital raises. Investors must scrutinize upcoming FY 2025 results for clarity on AVT05 remediation and ex-U.S. launch performance to gauge operational stability. Until positive free cash flow and sustained regulatory compliance are evidenced, the investment case remains highly speculative, warranting extreme caution and adherence to the DeepValue report's WAIT rating.

Thesis delta

The DeepValue report's WAIT rating is now compounded by legal risks, as the securities class action investigation highlights potential disclosure failures that could undermine management credibility. This adds a new dimension to the bear scenario, increasing the likelihood of further downside if governance issues persist or legal proceedings escalate. Investors should delay any entry until legal clarity and concrete operational progress, such as AVT05 approval and positive cash flow, are demonstrated.